Switzerland will raise its value-added tax rate for a decade to boost defense spending, its government announced today. “In view of the deteriorating geopolitical situation, the Federal Council wants to substantially strengthen Switzerland’s security and defense capabilities,” the statement reads. “To this end, additional resources in the order of 31 billion Swiss francs [€33 billion] are required.” The Council plans to temporarily raise VAT by 0.8 percent from the current 8.1 percent for 10 years, as of 2028. The additional revenues will be allocated to an armament fund that will also have borrowing capacity. However, raising the VAT requires a change in the constitution and a public consultation will open in the spring. Switzerland has been rethinking its defense stance since Russia’s attack on Ukraine almost four years ago. It is looking for more military cooperation with European nations and ramping up its rearmament, although it still has no intention of joining NATO. Switzerland spends about 0.7 percent of its GDP on defense, one of the lowest rates in Europe. The current goal of boosting that to 1 percent by 2032 is now out of date, the Federal Council said. “Due to the savings made in recent decades, the armed forces are also insufficiently equipped, particularly to effectively repel the most likely threats, namely long-range attacks and hybrid conflicts,” the statement added. Priorities for the country’s armament push include short- and medium-range air defense systems, cybersecurity and electromagnetic capabilities.

The killing of Alex Pretti by federal immigration agents in Minnesota has led to a rare rebuke of top Trump administration officials by leading 2nd Amendment advocates. Multiple national gun-rights organizations, as well as a prominent Minnesota gun rights group, have expressed horror at top Trump administration officials’ criticism of Pretti for being armed with a handgun that he had a legal permit to carry. “The FBI director needs to brush off that thing called the Constitution, because he clearly hasn’t read it,” National Association for Gun Rights President Dudley Brown told POLITICO. “I know of no more crucial place to carry a firearm for self defense than a protest.” FBI Director Kash Patel said Sunday on Fox News that “You cannot bring a firearm, loaded, with multiple magazines to any sort of protest that you want. It’s that simple. You don’t have a right to break the law.” DHS Secretary Kristi Noem said Saturday that she didn’t “know of any peaceful protester that shows up with a gun and ammunition rather than a sign.” White House press secretary Karoline Leavitt said Monday that “any gun owner knows” that carrying a gun raises “the assumption of risk and the risk of force being used against you,” during interactions with law enforcement. Gun-rights groups rushed to push back on an administration that was breaking with conservative orthodoxy on the right to bear arms in public places. Several were particularly outraged by Bill Essayli, the acting U.S. attorney for the Central District of California, who posted on X: “If you approach law enforcement with a gun, there is a high likelihood they will be legally justified in shooting you.” The National Rifle Association, a longtime ally of President Donald Trump, posted that Essayli’s remarks were “dangerous and wrong,” and called for a full investigation rather than “making generalizations and demonizing law-abiding citizens.” Aidan Johnston, the director of federal affairs for Gun Owners of America, called Essayli’s remarks “absolutely unacceptable.” “Federal prosecutors should know better than to comment on a situation when he didn’t know all the facts, to make a judgment in a case like this, and then also, just to make a blanket statement, threatening gun owners in that way,” Johnston said Monday. It’s not the first time Trump and the gun lobby have tangled since he returned to office. In September, gun rights advocates were shocked by reports that the administration was looking into a gun ban for transgender Americans. During Trump’s first term, his administration issued a regulation to ban bump stocks, but the Supreme Court ultimately blocked the rule in 2024. There are still conflicting accounts surrounding Saturday’s shooting — including whether Pretti’s hand at any point during the incident was near his gun. Video verified and analyzed by several media outlets, including the New York Times, show the item Pretti appeared to be holding was a phone he was using to film the scene before he attempted to help a woman who had been pushed to the ground by Border Patrol agents. According to a Washington Post analysis of video footage, federal agents appear to have secured Pretti’s gun moments before an agent shot the 37-year-old ICU nurse, who was also a U.S. citizen. “We can all see what is on video,” said Minnesota Gun Owners Caucus chair Bryan Strawser, arguing statements from Trump’s officials have not lined up with footage of the event. Strawser hoped the incident would help Democrats understand the importance of gun ownership. “If it has helped move the needle and helped individual folks realize that they should be protecting this right, I think that’s a good thing,” he said. “I think the more political-minded part of my brain would say, ‘are they just using this for their own political purposes and this isn’t going to change their position at all?’ I think time will tell as to where that goes.” California Democratic Gov. Gavin Newsom — who became a gun owner last year — responded on X to Noem’s remarks: “The Trump administration does not believe in the 2nd Amendment. Good to know.” Rep. Dave Min (D-Calif.) and former Rep. Mary Peltola (D-Alaska) also used the moment to highlight the right to carry. “Joining the gun lobby to condemn Bill Essayli was not on my bingo card but here we are,” Min said on X. “Lawfully carrying a firearm is not grounds for being killed.” Brown argued it was Newsom and Democrats who were being hypocritical, pointing to Newsom’s longtime support for more gun control. “The irony is thick,” he said. Jacob Wendler contributed to this report.

BRUSSELS — The European Commission on Wednesday unveiled a €90 billion loan to Ukraine aimed at saving it from financial collapse as it continues to battle Russia while aid from the U.S. dries up. About one-third of the cash will be used for normal budget expenditures and the rest will go to defense — although countries still need to formally agree to what extent Ukraine can use the money to buy weapons from outside the EU. A Commission proposal gives EU defense firms preferential treatment but allows Ukraine to buy foreign weapons if they aren’t immediately available in Europe. While the loan is interest-free for Ukraine, it is forecast to cost EU taxpayers between €3 billion and €4 billion a year in borrowing costs from 2028. The EU had to resort to the loan after an earlier effort to use sanctioned Russian frozen assets ran into opposition from Belgium. The race is now on for EU lawmakers to agree on a final legal text that’ll pave the way for disbursements in April, when Ukraine’s war chest runs out. Meetings between EU treasury and defense officials are already planned for Friday. The European Parliament could fast-track the loan as early as next week. The financing package is also crucial for unlocking additional loans to Ukraine from the International Monetary Fund. The Washington-based Fund wants to ensure Kyiv’s finances aren’t overstretched, as the war enters its fifth year next month. The €90 billion will be paid out over the next two years, as Moscow shows no sign of slowing down its offensive on Ukraine despite U.S.-led efforts to agree on a ceasefire. “Russia shows no sign of abating, no sign of remorse, no sign of seeking peace,” Commission President Ursula von der Leyen told reporters after presenting the proposal. “We all want peace for Ukraine, and for that, Ukraine must be in a position of strength.” When EU leaders agreed on the loan, Ukrainian President Volodymyr Zelenskyy called the deal an “unprecedented decision, and it will also have an impact on the peace negotiations.” Adding to the pressure on the EU, the U.S. under President Donald Trump has halted new military and financial aid to Ukraine, leaving it up to Europe to ensure Kyiv can continue fighting. Once the legal text is agreed, the EU will raise joint debt to finance the initiative, although the governments in the Czech Republic, Hungary and Slovakia said they will not participate in the funding drive.  The conditions on military spending are splitting EU countries. Paris is demanding strict rules to prevent money from flowing to U.S. weapons manufacturers, while Germany and other Northern European countries want to give Ukraine greater flexibility on how to spend the cash, pointing out that some key systems needed by Ukraine aren’t manufactured in Europe. MEETING HALFWAY The Commission has put forward a compromise proposal — seen by POLITICO. It gives preferential treatment to defense companies based in the EU, Ukraine and neighboring countries, including Norway, Iceland and Liechtenstein, but doesn’t rule out purchases from abroad. To keep the Northern European capitals happy, the Commission’s proposal allows Ukraine to buy specialized weapons produced outside the EU if they are vital for Kyiv’s defense against Russian forces. These include the U.S. Patriot long-range missile and air defense systems. The rules could be bent further in cases “where there is an urgent need for a given defense product” that can’t be delivered quickly from within Europe. Weapons aren’t considered European if more than 35 percent of their parts come from outside the continent, according to the draft. That’s in line with previous EU defense-financing initiatives, such as the €150 billion SAFE loans-for-weapons program. Two other legal texts are included in the legislative package. One proposes using the upper borrowing limit in the current budget to guarantee the loan. The other is designed to tweak the Ukraine Facility, a 2023 initiative that governs the bloc’s long-term financial support to Kyiv. The Commission will also create a new money pot to cover the borrowing costs before the new EU budget enters into force in 2028. RUSSIAN COLLATERAL Ukraine only has to repay the €90 billion loan if it receives post-war reparations from Russia — an unlikely scenario. If this doesn’t happen, the EU has left the door open to tapping frozen Russian state assets across the bloc to pay itself back. Belgium’s steadfast opposition to leveraging the frozen assets, most of which are based in the Brussels-based financial depository Euroclear, promises to make that negotiation difficult. However, the Commission can indefinitely roll over its debt by issuing eurobonds until it finds the necessary means to pay off the loan. The goal is to ensure Ukraine isn’t left holding the bill. “The Union reserves its right to use the cash balances from immobilized Russian assets held in the EU to repay the Ukraine Support Loan,” Economy Commissioner Valdis Dombrovskis said alongside von der Leyen. “Supporting Ukraine is a litmus test for Europe. The outcome of Russia’s brutal war of aggression against Ukraine will determine Europe’s future.” Jacopo Barigazzi contributed to this report from Brussels.

Russia has no veto over Kyiv’s bid to join NATO, alliance chief Mark Rutte said on Wednesday — rebuffing a peace deal proposal floated by Moscow and Washington that would block Ukraine from the alliance. “Russia has neither a vote nor a veto over who can be a member of NATO,” Rutte said in an interview with El País and German outlet RND. The alliance’s founding Washington Treaty “allows any country in the Euro-Atlantic area to join,” he added. Rutte’s comments follow a U.S.-led proposal to end Russia’s full-scale war, leaked last week, which included the provision that NATO agree “it will not accept Ukraine at any moment in the future.” The 28-point plan has since been modified into a 19-point one that waters down some of its most pro-Russian elements. An alternative European proposal scraps the idea of excluding Ukraine from NATO. Rutte took some of the sting out of his comment by insisting that he has positive feelings for U.S. President Donald Trump. “I like the guy,” he said. NATO allies have balked at issuing an immediate invitation for Ukraine to join the organization, but members last year agreed that Kyiv’s bid was “irreversible” — a statement Rutte has repeated since despite opposition to the country’s accession by Trump and other member countries. The NATO secretary-general acknowledged that several “allies … currently oppose Ukraine’s accession.” Rutte said the current peace plan, which came after broader diplomatic talks in Geneva on Sunday, provided a “good foundation for further discussions,” but added that any proposal will require a “separate, parallel discussion” with NATO “on certain issues.” European Commission President Ursula von der Leyen said on Wednesday that any decision about Ukraine’s bid to join the EU or the alliance should not be made unilaterally. “Nothing about Europe without Europe, nothing about NATO without NATO,” she told European Parliament lawmakers. Rutte also said the alliance would deliver a total of $5 billion in weapons to Ukraine as part of a NATO-led scheme that has European allies buying U.S. arms for Kyiv “by the end of this year.” Eleven countries have so far contributed to five $500 million packages as part of the so-called PURL program, with a sixth package expected in the coming days. The remaining money will come from a mixture of future packages and off-cycle payments, according to a person familiar with the matter, who was granted anonymity to speak freely on the sensitive topic. Rutte warned that Moscow will not stop jeopardizing Europe’s security even if it agrees to a peace deal. “Russia will continue to be a long-term threat for a long time,” he said.

LONDON — In the corridors of Whitehall, armies of officials are working out how best to spend billions of pounds earmarked for defense equipment. However, they have yet to inform the people it concerns the most: Britain’s arms industry. Many in the sector now fear that they’ve wasted their own money developing cutting-edge gear, as the government drags its feet on awarding contracts. U.K. Prime Minister Keir Starmer’s Labour Party has made a lot of noise on defense since entering government last year, plundering the aid budget to get defense spending to reach 2.6 percent of GDP by 2027 and a promise of 3.5 percent by 2035.  Alongside the funding boost, Starmer asked George Robertson, a Labour Party politician who is a former NATO secretary-general, to lead a major inquiry into how the U.K. would meet geopolitical threats, known as the Strategic Defence Review (SDR). The SDR was well received across the defense industry and viewed as a statement of intent from the government to devote effort and resources to building up the sector, with an emphasis on resilience and innovation.  Those good intentions were supposed to be followed by a series of complementary announcements — including a defense industrial strategy, the appointment of a new national armaments director, and a defense investment plan.  The industrial strategy and armaments director both arrived late, while the defense investment plan is still missing in action. It is now expected after this week’s fall budget.  Six months since the SDR, many in the industry complain that they haven’t received the certainty they need about where the British government — in many cases, their sole buyer —plans to invest.  Business owners say this is limiting their ability to make long-term plans and risks skilled workers departing for other jobs.  One representative of a mid-sized arms manufacturer — granted anonymity like others in this piece in order not to damage commercial prospects — said the problem was that the “big, bold” prescription of the SDR has given way to “repeated deferral, which always happens with delivery plans of this complexity.” INNOVATING IN THE DARK The war in Ukraine has radically reshaped other countries’ understanding of what’s needed on the battlefield, and the SDR set out a clear expectation that innovation would be rewarded. At September’s DSEI — an industry jamboree held in London — it was plain to see that private companies had stepped up to deliver prototypes for novel weaponry and other equipment, from modular robots that can deliver materiel to a battlefield and can also serve as stretchers, to AI that can read and predict threats on the ground in real time.  Defence Minister Luke Pollard said:  “We need to move to war-fighting readiness, and the SDR gave industry a very clear direction of how an increasing defense budget will be spent on new technologies and looking after our people better.” | John Keeble/Getty Images Much of that research and development was done by companies drawing on their own budgets or taking out loans as they wait for news of any specific government contracts.  For small suppliers in particular, the lag could prove existential.  One small manufacturer based in England said: “We are ready to go; we have built factories that could start making equipment tomorrow. But we can’t until an order is placed.” Armored vehicle maker Supacat has said that while its business is stable, suppliers will suffer without a predictable path ahead. “This is about the wider industry and our partners in the supply chain that have been contributing,” Toby Cox, the company’s head of sales, told POLITICO. “Our assumption is we don’t get more [orders], some of these companies will have a downturn in their orders.” KEEPING PRODUCTION LINES WARM Andrew Kinniburgh, defense director general of manufacturers association Make UK, echoed those concerns. While the industry “warmly welcomed” the Defence Ministry’s commitment to boost SME spending, he said, “the MOD must give companies certainty of long-term demand signals and purchase orders, allowing businesses to make the private investments needed in people, capital, and infrastructure.” Mike Armstrong, U.K. managing director of German defense firm Stark, which has recently opened a plant in Britain, added: “Giving the industry a clear view of future requirements is the fastest way to ensure the U.K. and its allies stay ahead.” Even some bigger companies that deal with the government on components for aircraft and submarines have privately complained about putting money into research and development without knowing what the end result will be.  An engineer working at one of Britain’s largest defense firms said: “We have multi-use items that could be for both military and civilian purposes, but cannot invest until we know what government strategy is. If it’s bad for us, it must be so hard for SMEs.” Mike Armstrong, U.K. managing director of German defense firm Stark, added: “Giving the industry a clear view of future requirements is the fastest way to ensure the U.K. and its allies stay ahead.” | Andrew Matthews/Getty Images The issue is not only one of investment, but also of skills. Supacat’s Cox said that keeping production lines warm matters because the workforce behind complex fabrications is fragile. “The U.K. has a skill shortage, particularly around engineering fabrication. If we’ve got an employee in that sector, we absolutely don’t want to lose them in another sector,” he said.  NOT LONG TO GO The Ministry of Defence said it appreciates the need for clarity. Defence Minister Luke Pollard, speaking to POLITICO at DSEI, said:  “We need to move to war-fighting readiness, and the SDR gave industry a very clear direction of how an increasing defense budget will be spent on new technologies and looking after our people better.” He argued there was “a neat synergy” between the “duty of government to keep the country safe and the first mission of this Labour government to grow the economy.” An MOD spokesperson said the defense investment plan would “offer clear, long-term capability requirements that enable industry to plan and unlocking private investment.” They pointed out that £250 million had already been allocated for “defense growth deals” alongside a £182 million skills package, and that the MOD had placed £31.7 billion in orders with U.K. industry in the last financial year. A government official rejected claims that ministers were moving too slowly, pointing to Defence Secretary John Healey’s recent announcement on new munitions factories as exactly the kind of demand signal that industry is looking for.  The director of a large U.K. defense producer said the signs from the government were “encouraging,” specifying that Chancellor Rachel Reeves, having agreed to more money for defense, “wants to see a return on investment.” While most of the country will be braced for Reeves’s big moment on Wednesday when she announces the national budget, one sector will have to hold its breath a little longer. Luke McGee contributed to this report.

The Central Bank of the Russia Federation lowered its key interest rate today and slashed its growth forecast for 2025 as the country’s economy is battered by a combination of high inflation and wide-ranging Western sanctions. The move comes after the U.S. imposed sanctions on two of its major oil suppliers, Rosneft and Lukoil. Oil and gas account for around a fifth of Russia’s gross domestic product (GDP). The bank updated its outlook, forecasting that the economy would grow by between 0.5 to 1 percent in 2025, down from 1 to 2 percent earlier. It also lowered its key interest rate by 0.5 percentage points, to 16.5 percent, despite forecasting an uptick in inflation next year, to between 4 to 5 percent. It’s unusual for a central bank to lower its policy rate while revising its inflation outlook upward, since lower rates are usually linked to higher inflation, and central banks are tasked with maintaining price stability. However, the combination of managing escalating foreign sanctions on the economy, together with the need to maintain a high level of industrial output to produce the armaments necessary to prolong its war on Ukraine, has put the bank’s governor, Elvira Nabiullina, in a tough spot. Ukraine’s ongoing drone campaign aimed at crippling Russia’s oil refineries has heaped further pressure on the country’s economic output. On Thursday, Herman Gref, who heads Russia’s largest lender Sberbank, said that it had been a mistake to focus too much on inflation at the expense of economic growth. In its statement, the central bank said that it sees inflationary pressures increasing in the medium term, as tax hikes, trade disruption and fluctuations in the oil price all bite. “Geopolitical tensions remain a significant uncertainty factor,” it said.

Serbian President Aleksandar Vučić has accused Turkey of violating international laws and destabilizing the Western Balkans by supplying weapons to Kosovo. “I am horrified by Turkey’s behavior and the brutal violation of the U.N. Charter and U.N. Security Council Resolution 1244, as well as the continued arming of the Pristina authorities,” Vučić said in a social media post Wednesday, referring to the capital of Kosovo. “It is now completely clear that Turkey does not want stability in the Western Balkans and is once again dreaming of restoring the Ottoman Empire. Serbia is a small country, but we have clearly understood the message!” he added. While a 1998 U.N. Security Council resolution does proscribe the sale or supply of weapons to Kosovo, an agreement from the following year, U.N. Security Council Resolution 1244, states that this prohibition “shall not apply to arms and related matériel for the use of the international civil and security presences.” Belgrade and Ankara have maintained complex relations, balancing economic cooperation with deep historical and political tensions. Turkey remains one of Kosovo’s strongest allies and was among the first countries to recognize its 2008 declaration of independence from Serbia. Vučić’s comments follow earlier accusations against Albania and Croatia of fueling an “arms race” in the region following the signing of a joint declaration on defense cooperation with Kosovo in March. The latest accusations come amid heightened tensions in northern Kosovo, where sporadic clashes between Serb communities and Kosovo’s security forces in recent years have reignited concerns over regional security. Ankara has not yet officially responded to Vučić’s remarks, but Turkish officials have previously defended their military cooperation with Pristina as part of efforts to strengthen regional defense capacities. In January 2024, Turkish Defense Minister Yaşar Güler and his Kosovar counterpart Ejup Maqedonci signed a military framework agreement in Ankara, expanding cooperation on arms sales, joint exercises and training programs.

Liam Byrne is chair of the Business & Trade Committee and a member of the U.K. Parliament. U.S. President Donald Trump’s state visit to the U.K. is no mere pageant. It is a test of whether Britain and America can enlarge the future, or if they will remain trapped in a tariff battle that serves neither party well. It was former Prime Minister Winston Churchill who warned in 1940:“If we open a quarrel between the past and the present, we shall find that we have lost the future.” This week, we must convince Trump that for all his unhappiness with America’s trade deals of yesterday, the future is the greater prize — and by working together, our countries can build a deeper partnership that helps keep the West safer, stronger and richer at a pivotal moment in world history. Prime Minister Keir Starmer did extremely well to ensure Britain was the first to strike the new “General Terms of an Economic Prosperity Deal” with the U.S. But we have to be honest: We’re now trading with our largest trading partner on terms that are worse than those we enjoyed before Trump took office. Industry called it “the best deal we could have hoped for under the circumstances.” But that phrase tells its own story. It means the best under duress, relief without permanence, and access on terms that, in some cases, are less favorable than those granted to our European neighbors. Even worse, uncertainty still gnaws at the future of our critical industries. Steel, aluminum and pharmaceuticals — all industries facing endless reviews — can’t plan investment against the specter of renewed tariffs. Boardrooms are hesitating; investors are holding back; jobs are hanging in the balance; and without clarity, capital may well migrate to safer harbors. This is why this deal can’t stop where it stands. It must be driven forward toward strategic alignment and commercial certainty during this state visit. The stakes are too high to deliver anything less — as was all too clear when Chinese President Xi Jinping gathered 20 world leaders to witness an extraordinary display of military and technology leadership in Tiananmen Square recently. We know that behind the tanks, troops, drones and hypersonic weaponry lies an invisible, formidable dark arsenal of AI capabilities — the armaments of tomorrow. With stagecraft, steel and silicon, China is making its claim to leadership clear. And unless Britain and America act, the commanding heights of the global economy will tilt East. This is the backdrop against which Trump’s visit must deliver. It is the moment to pivot from paper promises to strategic purpose and a binding bargain.   This new partnership has to be about more than tariffs. It must be about technology. As former Google CEO Eric Schmidt once said: “Technology is the power in superpower.” Britain and America have the building blocks for a formidable technology alliance: The U.S. boasts the world’s largest tech firms, deepest venture markets and broadest innovation ecosystem. Meanwhile, Britain is home to Europe’s most dynamic AI cluster, a world-leading life sciences base, universities of global caliber and the City of London’s unrivaled capital markets. Prime Minister Keir Starmer did extremely well to ensure Britain was the first to strike the new “General Terms of an Economic Prosperity Deal” with the U.S. | Andrew Harnik/Getty Images Alone, each is strong. Together, they could set the standards of the century. Therefore, the task in London this week is two-fold: First, enlarge the future. That means binding our nations around joint missions in AI, clean energy, biotech and digital trade. It means creating shared standards for data, procurement, labor and regulation. It means linking our research, finance and industrial capacity, so that when the world writes its rules, it is our rules — and our values — that prevail. Second, we must harness the promise of tomorrow to tackle the perils of protectionism today. Britain should press Trump to grant it the same terms as the EU in order to end the tariff uncertainty that still confronts our key industries, and provide the predictability investors require. Tariff relief alone isn’t enough; what matters is tariff parity — and the confidence it can unlock. So, let us be clear. This visit isn’t about gilded dinners or ceremonial splendor — though that is what will capture the media’s attention. Rather, it is about whether Britain and America can summon the imagination to expand the future and the discipline to settle the past. If we succeed, we’ll not only close the tariff gap but anchor Western leadership in the technologies that matter most. The lesson from history couldn’t be clearer: If we don’t shape the future, others will. And if technology is, indeed, “the power in superpower,” then only a U.S.-U.K. bargain, forged during this state visit, can safeguard Western leadership through tomorrow.

PARIS — France’s prime minister is likely to be ousted — again — and political turmoil risks delaying the country’s pledge to boost defense spending, amid increasing worry about the Russia threat and Donald Trump’s commitment to European security. If French lawmakers topple François Bayrou on Monday as expected, the overall direction of higher military spending will be slowed, but it’s not likely to be scrapped. However, the country’s focus on its domestic troubles comes in sharp contrast with French President Emmanuel Macron’s push for leadership on the global stage. On Thursday, he co-chairs alongside U.K. Prime Minister Keir Starmer a meeting of the so-called coalition of the willing, a group of countries working on security guarantees for Ukraine in case of a ceasefire with Russia. “There is a huge gap between the international context, which is still very bad with the war in Ukraine, and the internal French situation which seems disconnected from these issues,” said Guillaume Lagane, an expert on defense policy and a teacher at the Sciences Po public research university. “There is a strategic signaling problem; we are not conveying the right message to our adversaries and allies,” he stressed, adding: “Our allies are moving forward [with their military buildup], and we’re not.” If Bayrou is voted out next week, it’ll be the second time in less than a year that a French prime minister is toppled by the National Assembly, after Michel Barnier’s fall in December. “Once again, there is uncertainty,” conceded French Armed Forces Minister Sébastien Lecornu last week when asked about the impact of Monday’s vote on the country’s military ramp-up. Lecornu is one of the front-runners to replace Bayrou should he be ousted. NEW MILITARY PLANNING LAW In July, Macron promised that France would boost defense spending to €64 billion in 2027. His pledge came a few weeks after NATO allies committed to boost defense spending to 5 percent of gross domestic product, including 3.5 percent of GDP for purely military expenditures. That’s a sharp increase compared with the previous 2 percent target. The French president said the government would present to parliament in the fall an update of the seven-year military planning law to earmark the spending increases. That bill, which is not ready yet, is bound to be postponed if France has to change government or even go through another snap election — an option that remains on the table. “The defense budget increases announced by President Macron … [and] welcomed by a majority of the political class, remain dependent on a vote in parliament: they are therefore now uncertain,” said Bertrand de Cordoue, an adviser on defense and armament at the Jacques Delors Institute. There is broad agreement across France’s political spectrum that the country’s defense expenditure should increase and a change in prime minister is not likely to threaten that. According to Hélène Conway-Mouret, a Socialist senator who sits on the defense and foreign affairs committee, “no one will dare touch the [defense spending] commitments that have been made, because they are existential.” However, parliament, industry and military officials warned in conversations with POLITICO that precious time will inevitably be wasted. Defense companies will also be more reluctant to invest or make long-term plans before the political crisis is resolved, they said. This week, Lecornu embarked on a France-wide tour to visit defense companies despite the political crisis, in a bid to show that prep work for the updated military planning law continues regardless. But in French defense circles, there’s an awkward feeling of déjà vu. “Here we go again,” sighed a defense industry official, speaking on condition of being granted anonymity, summing up the mood among French arms-makers. The fall of Barnier’s government ultimately led to months of delays in orders and payments for military equipment. “The military has not forgotten that the Barnier government’s censorship messed up some of the weapons programs,” said a parliament official.

BERLIN — When French President Emmanuel Macron arrives on Wednesday evening at a villa on the outskirts of Berlin where he is set to go for a stroll, listen to a jazz trumpet performance and dine with German Chancellor Friedrich Merz, the two leaders are likely to exhibit plenty of back-slapping bonhomie. After all, on Merz’s first full day in office in May, he traveled to Paris and vowed “a new Franco-German start for Europe” after years of strained relations between Macron and Merz’s predecessor, Olaf Scholz. Merz said at the time that he had already developed a “deep personal bond” with the French leader that would help them work together. “The atmosphere is completely different,” said one senior German government official with intimate knowledge of Franco-German relations. “I’ve never experienced this kind of interaction in all these years.” Paris thinks the same. “The Franco-German reflex has been rediscovered,” an Elysée official said. But despite the good vibes and increased cooperation on policy areas involving deregulation and migration, the leaders are finding it increasingly difficult to conceal an uncomfortable reality: The promised restart of the Franco-German engine that long powered the European Union is already sputtering, as Merz and Macron confront a series of intractable divisions on everything from defense to trade. One of the key differences between the current German chancellor and his predecessor is that Scholz recognized how difficult it would be to resolve the key Franco-German differences, and didn’t want to exert enormous energy to achieve the nearly impossible, one conservative lawmaker focusing on foreign relations told POLITICO. “Scholz failed because he is smart and simply realized how difficult it is and then lost interest,” the lawmaker said. “We have the desire” to make the Franco-German relationship work, he added, “but it is still difficult.” NEW AGREEMENT, DEEPER DIVISIONS Merz and Macron have a lot in common when it comes to their pro-business leanings and desire to see less regulation. Perhaps the greatest example of this was last month’s cooperation between the two leaders to defang a due diligence law meant to bring EU-style protections to global supply chains. Another area of increasing agreement is on nuclear energy. In May, Merz’s economy minister, Katherina Reiche, signaled that Berlin was prepared to give up its long-standing opposition to classifying nuclear power as a renewable energy source, potentially ending an enduring clash that has complicated EU energy policy. (Merz’s junior coalition partners, the Social Democrats, oppose the move however.) Disagreements between France and Germany also threaten to derail a European project to develop a next-generation fighter jet that would make the bloc less likely to rely on American F-35s. | Jeroen Jumelet/EPA The two leaders are also increasingly aligned on drastically reducing the number of asylum seekers coming to Europe. Another potential area of cooperation may involve France’s nuclear deterrent and a potential agreement on how the French could use it to contribute to Europe’s wider security. “This is not a debate that takes place in the media spotlight,” the Elysée official said.  But the core disagreements concerning trade and defense have seen little in the way of rapprochement. “There are two major issues that Germany and France need to resolve in order for us to really make progress,” said Roland Theis, a conservative German lawmaker specializing in Berlin’s relationship with Paris. DEFENSE AND TRADE The divisions on defense were laid bare earlier this month when U.S. President Donald Trump backed a German initiative to have Europeans supply Ukraine with American-made weapons. While Nordic countries and the U.K. supported the plan, France opposed it in keeping with Macron’s longstanding push to have Europe produce more weapons locally and reduce dependence on the U.S. Disagreements between France and Germany also threaten to derail a European project to develop a next-generation fighter jet that would make the bloc less likely to rely on American F-35s. The Elysée official downplayed disagreements over the fighter jet program, saying Merz and Macron “want to move forward.” But some of the deepest divisions continue to revolve around trade. Merz is pushing the EU to come up with a quick and simple trade agreement with the U.S. in order to put an end to the Trump tariff wars that are hitting German industries particularly hard. The French, meanwhile, are pushing for a tougher approach and better terms. As Merz pushes for free trade agreements with other parts of the world, the Germans are also encountering French resistance on an EU deal with South America’s Mercosur trade bloc, with Macron anxious to protect his small but politically powerful farming community from new meat imports. The only way to bridge these differences is for the Germans to move closer to the French on defense, and for France to move closer to Germany on trade, says German lawmaker Theis. “Behind every French push for greater Europeanization of our armaments, Germany always sees a Trojan horse that allows the French to transport their own interests, especially with regard to their arms industry. We must get over that,” he said. At the same time, he added, “the French need to move on the issue of free trade. Just as we must become more independent from the U.S. in terms of defense, [Europe] must also become more independent from the U.S. in terms of trade relations.” WINDOW OF OPPORTUNITY CLOSING Both Macron and Merz will likely have to upset key constituencies at home in order to push the alliance forward, according to experts. “The chancellor and the president are in a dilemma,” said Jacob Ross, a researcher focused on Franco-German relations at the German Council on Foreign Relations. “They have to sacrifice things in terms of domestic policy to make progress in terms of foreign policy.” But the moment for compromise may soon be lost as both leaders face similar domestic political pressures — in particular the growing influence of far-right parties. The far-right Alternative for Germany (AfD), now the biggest opposition force in the country’s parliament, portrays Merz as preferring to spend time abroad rather than solving problems at home. In France, the far-right National Rally is polling far ahead of all other parties at 36 percent.  The far-right Alternative for Germany portrays Merz as preferring to spend time abroad rather than solving problems at home. | Hannibal Hanschke/EPA But the biggest obstacle to compromise may be the next presidential election in France, which is set for April 2027. Macron can’t run again because of constitutional term limits, and the country’s domestic politics are looking increasingly unstable. “There simply is a lot of time pressure,” Ross said. “There is only a year left in which they can somehow reasonably work together.” After that, he added, “the Germans can forget about relying on a functional and active French government, because they will be in complete election mode.” Laura Kayali contributed reporting from Paris.